Clampdown on individual responsibility for conduct and standards in the financial sector

The Financial Conduct Authority (FCA) has announced this week that two new schemes have come into force which will hold individuals working at all levels within the banking industry to appropriate standards of conduct, as well as ensuring that senior managers are held to account for misconduct that falls within their area of responsibility. 
The Senior Managers Regime for the banking sector and the Senior Insurance Managers Regime are both a response to the previous economic crisis, which was blamed on the irresponsibility of the financial and banking sectors. 
The launch of the new Regimes implements the recommendations made by the Parliamentary Commission for Banking Standards (PCBS) in its report “Changing Banking for Good” which was published in June 2013. The report contained a number of recommendations for actions designed to improve professional standards and culture in the UK banking industry.  
To embed the new Regimes even further within the industry, the Financial Conduct Authority has decided to hold their own internal structure to these new standards, publicly setting out a list of who holds responsibility for each senior management function within the regulator. 
Tracey McDermott, Acting Chief Executive at the Financial Conduct Authority, said:
“Today marks the beginning of a new era of increased individual accountability. The Senior Managers regime is not designed to re-invent the way that firms organise themselves but to reflect and ensure clarity about how this operates in practice. 
“We are determined to embed a culture of personal responsibility within the banking sector.
We hold ourselves to the highest professional standards and so we have decided to apply the fundamental principles of the Regime to our senior staff.”
The reforms continued as Section 36 of the Banking Reform Act also came into force, which makes it a criminal offence to fail to prevent the collapse of a bank. An individual can now be prosecuted if they fall below certain conduct levels, make a decision which causes risk to a bank or which causes a bank to fail.
Debt Advice Foundation CEO David Rodger said of the announcements;
“These changes will hopefully protect against another financial sector collapse and avoid the significant economic hardships that followed for many hard-working families across the UK“